MLB Free Agency 101

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Why is our free agency system so complicated?! Logan, can you break it down for me?

The 2011 free agency period is now upon the Rockies and there are many theories on just who the team should sign.  However, for us to fully understand all of the Rox’ options, we must first understand the general rules of MLB free agency and how they will impact Colorado’s decision making process this off-season.  I’m going to break this down into two posts.  The first portion is an explanation of MLB’s free agency system and the second will be an evaluation of the Rockies’ options.

The roots of free agency trace back to 1969, when St. Louis outfielder Curt Flood refused to accept a trade to the Phillies.  Flood took his case all the way to the Supreme Court, and though he lost, his fight set the wheels of baseball free agency into irreversible motion.  The Players’ Union and the Owners fighting it out in the United States Supreme Court was not a good thing for anybody.  In order to avoid future disputes of this nature, an arbitration system was put into place.  For the first time in the history of baseball, players had leverage and a third party to settle their grievances.

Six years later, two pitchers — Andy Messersmith and Dave McNally — pitched the entire season without a contract in place.  In those days, the standard contract included a “reserve clause” that remained applicable after expiration of the player’s original contract.  The clause stipulated that teams retained absolute control over their players.  Players could not leave a team unless they were traded or cut; free agency was literally unheard of.   Messersmith’s and McNally’s contracts expired at the end of the 1974 season so the reserve clause was applicable.  They had to either sign the teams’ proposed contracts or break the mold and risk playing an entire season without guaranteed payment.  Both players made the bold choice and played the 1975 season without contracts.

One main principle of contract law is mutual acceptance — a meeting of the minds.  If one party doesn’t accept, then there is no contract.  At the end of the 1975 season, this was Messersmith and McNally’s position.   Since they never agreed to a contract in 1975, they were free of any obligation to their team in 1976.  An arbitrator agreed, the reserve clause was abolished, and free agency was created.  Interestingly enough, McNally retired after 1975; he took his stance for the good of baseball.  Messersmith signed for big money with the Braves.  Because of Messersmith and McNally, Jeter makes $20 million a year and has been linked to half of the Maxim Top 100 list.  To steal a line from the Jersey Shore, they jumped on a grenade for the rest of baseball.   But not even “the Situation” would have jumped on a grenade that large.   Messersmith and McNally = the greatest wingmen of all time.         

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Yo Sitch, you ain’t got nuthin’ on Messersmith and McNally

Baseball was at the forefront of the free agent movement in sports.   The NFL, for example, didn’t recognize free agents until 1993 — nearly twenty years later.  This is the obvious answer to why baseball players make so much more than football players.  The overall functionality of baseball’s free agency system has not  changed much over the years.  Players still have the right to sign with any team they would like.  However, the intricacies of the system have changed dramatically and we now have a scheme that the majority doesn’t comprehend.  Mostly because people have lives.  Well I don’t, so I am going to explain this convoluted arrangement in a way that everyone can easily understand.

Here’s a hypothetical situation.  If the Rockies draft an amateur player (herein referred to as after Player A), they retain full rights to Player A for three minor league seasons.  They can promote, demote, trade or waive the player without any repercussions.  After three seasons, a crossroads of sorts is reached.   Major League teams have an active twenty-five man roster, but they must also keep a forty man roster.  Presumably, the inactive fifteen are their top minor league prospects.  If after three seasons the Rox would like to retain their options on Player A, he must be on the forty man roster.

If Player A is not on the forty man after three minor league seasons, he becomes eligible for the Rule 5 draft.  The Rule 5 draft happens in December and it is an opportunity for teams to find Major League talent that has for whatever reason been log-jammed in another farm system.  If a team selects Player A in the Rule 5, they must keep him on their twenty-five man roster for the entire next year or they risk losing him back to Colorado for a fraction of their purchase price.  Interesting tidbit — the Reds acquired Josh Hamilton from the Rays in the Rule 5 Draft.

If Player A is on the forty man roster after three minor league seasons, then the Rockies have him locked up for three more years.  They can move Player A between the Bigs and the minors as they see fit. Players who fall into this category and have actual Major League service often become eligible for salary arbitration, but that is a discussion for another day.  If at any point Player A is removed from the forty man, he will become a free agent immediately.

After six years of service, if Player A is not signed to another  contract, he becomes eligible for free agency.  In order to protect small market teams who are unable to resign their top homegrown players, a compensation system was put into place.  If Player A’s performance ranks in the top twenty percent for his position, he becomes a Type A Free Agent.  When Player A signs with another team, that team is required to compensate the Rockies with either their first or second round pick in the next year’s draft.  Additionally, the Rockies are awarded a “sandwich pick” which is in a supplemental round, between the first and second rounds.  If Player A’s performance ranks in the top 21-40% range, he becomes classified as a Type B Free Agent.  If Player A signs with another team as a Type B free agent, the Rockies only receive the “sandwich pick”.

In order to collect compensation for the departing Player A, the Rockies must first offer him salary arbitration.  This caveat was inserted into the process as incentive for teams to at least make an attempt to retain their homegrown talent.  Jorge De La Rosa is currently a Type A Free Agent and it is very likely that he will sign elsewhere.  The Rockies will offer him arbitration to make certain they are remunerated for Jorge’s departure.   More than likely, they will receive a first rounder and the sandwich pick.  However, if the team that signs De La Rosa also signs another higher-rated Type A free agent, the Rockies would have to settle for a second round pick.  The compensation system is also the reason that the Rox are unlikely to pursue any Type A free agents for themselves.   The organization takes pride in their farm system and will always be very hesitant to surrender any top draft picks.

There, clear as mud I’m sure.  Tomorrow we will delve into some realistic free agent options for the Rockies.